Non PG LTV Ratio

March 15, 2021

by a searcher from Stanford University - Graduate School of Business in 701 E Bay St, Charleston, SC 29403, USA

Is there a reasonable LTV under which a commercial bank will consider lending without Personal Guarantees? Or does the debt have to be collateralized regardless of equity contribution?

If we close all cash, could we refinance to apply some leverage and avoid PGs that way?

Apologies if this has been asked....I searched for previous posts but was unable to locate one. Thanks in advance!

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

It is all going to depend on the strength of the corporate balance sheet and the overall leverage. There are some lenders that will consider limited or non-recourse transactions, but typically they want a really strong balance sheet and low leverage. I would not say there is a magic number across the industry that works. It all depends on the lender and is different for each particular transaction. A company without much in the way of hard assets is going to have a harder time finding limited or non-recourse than a company that has substantial assets and a strong loan to value against those assets. Especially in the current market, I am seeing few deals get done with no recourse again unless the loan to value and leverage are really low (below 50%) and the balance sheet is strong.

Reply by an investor
from University of Pennsylvania in Washington, DC, USA

Brian - here's a decent thread that covers some of the discussion previously on doing non SBA for <$2M EBIDTA deals - https://www.searchfunder.com/post/non-sba-lenders-and-rates

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